Car Leasing Traps You Should Avoid

On the surface, leasing looks like an inexpensive way to have a nice car you couldn’t normally afford. Or, maybe you want to enjoy a new car every few years. Regardless of your reasons, you would be wise to enter a leasing deal with your eyes wide open.
For example, if your car is worth $50,000 and the dealer estimates it will be worth $25,000 in three years, your monthly payments will be calculated to cover the $25,000 in value loss.
If the vehicle you’re leasing historically has a higher residual value, your payments will be lower. But your monthly payment will be higher if the dealer estimates the residual value to be lower than what usually happens with that vehicle.
Research the value and depreciation of the car you’re considering leasing. Ask about the residual value. If this value is lower than what historically the car has been at, you might want to walk away.
For example, a 36-month lease that allows you 10,000 miles per year may have a $0.20 per mile charge for every mile you go over the limit. That doesn’t sound like too much. But if you drive 13,000 miles per year, the overage will cost you $700 per year or $2,100 at the end of the lease.
If you drive under 10,000 miles, you’re not given a credit for driving conservatively. You’ll end up paying for depreciation that you didn’t use.
To ensure your deal is a good one, multiply the number of payments minus one for the total lease. Then add that amount to the money due at signing and any extra fees. That total is the actual cost of the lease.
For example, if you have a lease for $359 per month for 36 months, you would multiply the payments by 35. (The first payment is rolled in with the amount due at signing, so you don’t want to count it twice.) That total is $12,565.
When leasing a car, the leasing agent owns it. If the car was totaled and you had gap insurance, the insurance company would pay your leasing agent the difference.
But if you don’t have gap insurance, you must pay the leasing agent. Otherwise, you’ll be paying for a car you can no longer drive.
It’s imperative that you know your driving habits so you don’t exceed the designated mileage per year. If you do, it could cost you hundreds of dollars.
Your best course of action may be to take your total lease price and shop around.